AOL to Cut 1,300 Workers In U.S.
Call Centers Bear Brunt of Reduction

By Sara Kehaulani Goo
Washington Post Staff Writer
Wednesday, May 10, 2006

AOL LLC said yesterday that it will reduce its workforce by 7 percent, or 1,300 employees, many of them call-center workers whose job was to persuade members not to cancel Internet service subscriptions.

The Dulles company said it closed its Jacksonville, Fla., center yesterday and laid off all 780 employees there and more than 100 others in Ogden, Utah. About 300 employees in Tucson are to be let go in June, the company said. The announcement affected four or five Washington area employees who worked for the same division.

Just last year, AOL offered the same call-center employees bonuses for every subscriber they talked out of canceling service. After consumers complained it was too difficult to sever ties with the company and New York Attorney General Eliot L. Spitzer claimed AOL's practices were not consumer-friendly, AOL agreed to stop, ending the employee incentives in August 2005.

AOL said the layoffs yesterday reflected a shift in the company's membership base. Since January, the company has been moving toward a revenue model that relies heavily on online advertising instead of solely on monthly fees from dial-up subscribers.

"AOL is a different company today," said spokesman Nicholas J. Graham. "Our membership base has changed greatly over time."

Graham characterized AOL's users as more online-savvy today and less dependent on customer-service support over the phone. Call volume to the company's customer-support centers has fallen 50 percent since 2004, he said, and more customers are finding answers to their questions and problems at the troubleshooting section of its Web site. "What took several phone calls to accomplish before, today takes a couple of clicks," he said.

In October, AOL closed its Orlando office, eliminating 450 call-center jobs. The company's other call centers in Oklahoma City and Albuquerque remained largely unaffected by the announcement yesterday.

Graham declined to say how much money the company will save because of the layoffs, but the move comes at a time when AOL's parent company, Time Warner Inc., has been pressured to cut costs and boost its stagnant stock price. In a recent concession to activist shareholder Carl C. Icahn, Time Warner agreed to cut $500 million in costs this year and $500 million next year. AOL said the layoffs will be accounted for in earnings for the second and third quarters.

Some analysts have said that AOL's financial future remains uncertain as it tries to find its way among competitors and within the Time Warner brand. In a research note after Time Warner's quarterly earnings were issued earlier this month, analyst Katherine Styponias of Prudential Equity Group LLC said "the AOL division's financial outlook continues to be murky and likely remains an overhang on the stock."